Traditional IRA vs Roth IRA Part 1

Traditional IRA vs Roth IRA: Part 1

February 29, 2016

 

Planning for Your Retirement

As we entered the New Year, some people may or may not be thinking about their retirements. If you haven’t started thinking about it yet, you should start. Especially if you’re young! I can’t stress how important it is!!

Two years ago, I blogged about the difference between a traditional 401K vs. Roth 401K. Now I’d like to talk about the difference between a traditional IRA vs Roth IRA.

What is an IRA?

An IRA means Individual Retirement Arrangement according the current tax codes. The IRA itself is NOT the investment. The abbreviation “IRA” tells the IRS how the investments inside the IRA are going to be treated.

The IRA was introduced in 1974 as part of the Employee Retirement Income Security Act. It was intended to help people save for retirement. It is a tax deferred program, meaning, the money you put into an IRA does not get taxed until you start pulling the money out before or after 70 1/2 years old. I say after 70 1/2, because after that age, anyone who has an IRA will have to take out mandatory and government-calculated distributions from their IRA’s.

Even though you can take out withdrawals from your IRA early, under certain situations, if you are younger than 59 1/2, I do not recommend doing that. By taking early withdrawals, you will be hit with fees and the money you take out will be taxed heavily. So unless you are looking at your home being foreclosed on or a bankruptcy, I do not recommend taking early withdrawals from ANY retirement accounts. Including work related retirement accounts like 401K’s and 403B’s.

Earned Income Only

Under current tax law, only those with an earned income are eligible to start an IRA. As of 2013, if your income is LESS than what the maximum contribution could be, you can not contribute more than what your total household income is.

So in other words, you have to have a job to have an IRA, with the exception of a non-working spouse. If you and your spouse file your taxes jointly, you can both contribute up to the maximum $5,500 ($6,500 if you’re over 50) even if one of you is not earning an income.
Example: the working spouse can contribute $5,500 and the non-working spouse can contribute $5,500 for a total of $11,000 ($13,000 if you both are over 50) per year, or whatever your maximum household income is.

Part 2

Seeing that this is getting long, I’m going to explain what a Roth IRA is next week. I hope this blog gives you a better understanding on what an IRA really is. If you have any question, please don’t hesitate to ask.

Living in a Cause and Effect World

Living in a Cause and Effect World

February 22, 2016 

Just like what the title says, we are Living in a Cause and Effect World. Most of us don’t give it a second thought, but everything we do or don’t do in life have consequences. Sometimes we don’t see what those consequences are for many years, but they’re there. And when it comes to our finances, it’s no different. In this week’s blog, we will go over some facts when it comes to our finances. It is my hope that just seeing these facts, will make you take a second look at what you’re doing with your finances and give you a direction in which to make any changes you feel need to be changed.

Financial Facts

The average household income in the U.S. is $50,000 per year. That means in a ten year period, that same average household will have made $500,000.

The average new car payment is $482 per month and $437 for a used car. If you were to invest those monthly payments from 16 – 65 years old, you would have between $13 to $14 million in an investment.

75% of the Forbes 400 (the 400 wealthiest people in the U.S.) say the best way to build wealth is to get out and stay out of debt.

The number one reason for college students dropping out of college is because of their overwhelming debt. Most of them having student loan debt to pay without a degree.

The number one reason people file for bankruptcy here in the U.S. is because of medical debt. Credit cards are number two.

As of May 2015; the average credit card debt is $15,609. Mortgage debt is $156,706. Student loan debt is $32,956.

45% of credit cards holders here in the U.S. make only minimum payments.

The formula used to create your credit (FICO) score has nothing to do with you winning financially. It does however have everything to do with your debt payment history, your debt levels, length of time you’ve been in debt, what kind of debt you have, and what kind of new debt you have.

This list can go on and on…

Conclusion

Folks, I hope you can see a continual theme here. Debt is nothing more than a thief that steals your future. It takes your hard earned money away from you so you can’t invest for retirement or even your kids’ college fund. The bad thing is, most people whole heartedly believe that they need some sort of debt in order to get the things they need or want and that’s just NOT TRUE!

So let me ask you, has this week’s blog opened your eyes just a little bit? Was it enough to make you think you need some changes in your financial life? I hope so. If you need some help dealing with your finances or just want a financial check up, give us a call at 616.454.2046 or email us at bunncapitalchoice@gmail.com

Comments

It was brought to my attention that people were wanting to make comments to blogs that are being posted, but had to jump through all kind of hoops to do it. I think I solved that problem. So please let me know if that is fixed. Thank you!

Life Insurance, Protecting You and Your Family

Life Insurance,

Protecting You and Your Family

February 15, 2016

For 7 years now, my wife, Julie and I have been helping people with their overall financial wellness. Now, we have taken it one step further by helping people understand the importance of Life Insurance.

Life insurance. We sure do have a love hate relationship with this topic, don’t we? How much to get, what kind to get, and who to get it from seems to be the typical questions that most people ask.

Well, let’s ask a question that most people don’t ask. What is life insurance for? There are many applications life insurance is used for these days, but to put it simply, life insurance is for replacing lost income due to death. Now that we have established that, the other questions seem to answer themselves. So let’s start with the first question…

How much to get: We believe the way Dave Ramsey thinks. You should have about 10 to 12 times your annual income in life insurance. The reason why, is this. If you or your spouse were to pass away, the survivor can take the face value of the policy and invest it to replace any lost income, as the example below shows.

Annual income of $50,000 x 10 = $500,000 in Life Insurance. 

$500,000 x 10% rate of return = $50,000.

Now we all know that the stock market goes up and down like a roller-coaster. So even if the rate of return for a particular year was less, let’s say 6%, you’ll still be making $30,000 that year. Something is better than nothing.

What kind to get: Again, following Dave’s philosophy, the Only kind of life insurance you should buy is Term Insurance. Why? Simple. It costs far less than any type of Cash Value or Whole Life policies on the market today. And here’s the biggest reason… any amount of saving built up in those kind of policies is kept by the insurance company when you pass away. How is that right? In fact, there are only 3 ways you can get money from a cash value or whole life policy. 1) Live to 100 years old. 2) Cancel the policy. 3) Take a loan out on it, which you will have to pay back. So Term Life Insurance is definitely the way to go.

Who to get it from: Now I'm not trying to sell you on the life insurance we sell. There are hundreds of companies out there to choose from. We can have a sit down chat about what we offer over coffee, but for the sole purpose of this blog, I just want to stress the importance of getting the right policy, with the right coverage for you and your family. So shop around. Don't just go to one company and buy what they have, the next company you check out may be a better fit for you.  

Folks, life insurance is a must if you have a family that depends on you for financial stability. Protecting you and your family from the unforeseeable future is just another way you tell them “I Love You”.

What to do if Your Identity is Stolen

What to do if Your Identity is Stolen

February 8, 2016

We all know about the little cartoon guy above, a typical bank robber. You see and hear about them all the time on the news, as well as, the car thief and shop lifter, but did you know that the number one Blue Collar crime in the U.S. is rarely mentioned on the news and the odds of you knowing the thief are pretty good if it happens to you? The number one Blue Collar crime is Identity Theft.

It’s not only the number one Blue Collar crime in the U.S., it is the fastest growing crime also. The problem is, it’s such a silent crime that no one really knows about it until it’s too late. So what can you do to protect yourself against I.D. theft? Unfortunately, there isn’t anything you can do to prevent I.D. theft from happening to you, however, you can freeze your credit (FICO) score as a deterrent. So IF a creditor looks up your credit score before giving you a loan or an open line of credit, they won’t be able to see anything and they will not be able to give you what you’re asking for. This will be inconvenient for you if you are still going to use credit, but if you have decided you are never going to borrow money again, this shouldn’t be a problem.

What to do if your identity is stolen

If you discover that your identity is stolen, the first thing you need to do is place a temporary fraud victim alert on your credit bureau reports and you can do that for free online at the following links… 

https://www.experian.com/fraud/center.html, 

https://www.alerts.equifax.com/AutoFraud_Online/jsp/fraudAlert.jsp,

https://www.transunion.com/customer-support/contact-us-consumers.

The next thing you need to do is call the police and get a police report. Now this is where most people refuse to follow through and pay what they legally do not owe. You have to tell the police who stole your identity if you know, and that’s what most people don’t want to do because a good portion of the time it is a relative of some sort that has stolen their identity and they don’t want to get their relative in trouble. But if you do follow through, and you give up the thief’s name, it is out of your hands on what the authorities will do with that information. When you get a copy of the police report and give each of the credit bureaus a copy, that will make the temporary fraud victim alert permanent. If you don’t give them a copy, the fraud victim alert will only stay on your credit bureau 90 days.

The next thing you need to do is call the fraud victim division of all the creditors where your I.D. was stolen and provide them with all the information, including a copy of the police report showing that your I.D. has been stolen. Now they may act like you are trying to get out of paying a bill, so don’t let them pressure you into paying something you don’t owe.

Medical I.D. Theft

This issue is even causing problems in the medical world. “A thief may use your name or health insurance numbers to see a doctor, get prescription drugs, file claims with your insurance provider, or get other care. If the thief’s health information is mixed with yours, your treatment, insurance and payment records, and credit report may be affected.” warns the Federal Trade Commission.

Medical I.D. theft has gotten so bad that an organization was formed called the Medical Identity Fraud Alliance (MIFA). And in a study they did, they estimating that 2.3 million Americans suffered from this issue in 2014. Which was up almost 22% over 2013. And almost one third of those victims lost their health insurance because of it.

The bad thing is, if you’ve had your I.D. stolen, you now have a new hobby if you don’t have identity theft insurance that assigns a counselor to you, like at Zander Insurance does, to clean up the mess for you. On average, it will take you 600 hours to clean up this kind of mess. In 2008 alone, 15 million people had their identity stolen, and it has only gotten worse, so this is a big deal.

Identity Theft Protection

Identity Theft Protection

February 1, 2016

Identity Theft is NO Joke

As I mentioned countless times on Facebook, identity theft is a big deal. And because of this, several insurance companies have started to cash in (so to speak) on this type of theft.

Don’t get me wrong, I’m all for buying identity theft protection to protect you and your family as long as they actually do what they claim to do and for a great price. But who do you pick? Which one is the right one for you? Well, I found 4 insurance companies that claim they have an identity theft protection program. These companies are LifeLock™, Zander™, MetLife™, and Progressive™. Now there may be more companies out there that provide identity theft protection, these are just the ones I came up with. If your insurance company you have your home and auto policies through have an identity theft protection program and they’re not listed here, you may want to check them out to see what they offer.

Now, I only asked these companies 5 questions. These are the same 5 questions I would be most concerned with if I was in the market to buy one of these products. The questions are…

• Do they have credit monitoring?
• Do they have guarantees? If so, what are they and what do they cover?
• What is the cost for singles and/or household protection (meaning minors)?
• What kind of identity theft does it cover?
• What happens if my I.D. is stolen?

Credit Monitoring and Guarantees

To make this as simple as possible, all but one of these companies has credit monitoring. Zander™ was the only one that didn’t and I will get to the reason why they don’t later on. Also, all these companies have at least a $1 million dollar guarantee. The only one that didn’t have the million dollar guarantee was the MetLife™ Defender program, they have a $5 million guarantee.

How these credit monitoring programs work is, you give these companies all your information, social security numbers, banking information, credit card information, etc… and they plug that information into their systems to see if any of your information comes up in places that shouldn’t be there or if they see some unusual charges, or canceling or starting up accounts in your name, they will contact you to see if it is really you doing all that. The reason Zander™ doesn’t do credit monitoring is because there is NOT a 100% fool proof system that can prevent identity theft from happening no matter how good someone’s system is. There are just too many holes for an identity thief to sneak through. So Zander™ focuses more on restoring your I.D. to a pre-theft status. More on that later on.

The guarantees DON’T mean that if your I.D. is stolen while under these programs, you’re going to be receiving a million dollar check. That money is used to help cover any EXTRA costs due to external services to help restore your I.D. such as attorney costs and any out of pocket cost you may accrue, just to name a couple. Truthfully, there are slight differences between all 4 companies, but they are all for covering reasonably costs due to extra services needed to restore your I.D.

How much do these Programs Cost?

Truthfully, these prices were all over the place, and not all of them covered minors or had a price for covering the whole household. Most of these companies did have monthly plans that people could pay, but it was cheaper to buy these products yearly, and that’s what I’m going to focus on in this blog.

Out of the 4 companies, MetLife™ was the most expensive. For an individual it was $245 per year. For a household that covered 2 adults and all children under the age of 26 was $495 per year.

LifeLock™ was the second most expensive. They had several different levels of protection programs you could choose from, but their Ultimate Plus™ program (which covered everything they offered) was $329 per year and they did not have a household plan.

Progressive™ was next with their Progressive Advantage℠ Identity Theft Protection, which was $159.95 per year. And again, this was for all individuals. No household plan.

And lastly, Zander™ came in at $75 per year for individuals and their household plan that covered everyone (including children up to the ages of 25) for $145 per year.

What do they Cover?

Again, all 4 companies cover just about the same thing. Personal data, financial, medical, etc… just to name a few. Some companies were slightly different by offering some bells and whistles, like MetLife™ has an online child protection program that monitors for cyber-bullying, child predators, and child I.D. theft. Others also offer you a free credit report each year. But other than that, they all cover the same types of identity theft.

What happens if Your I.D. is Stolen?

Once again, they all pretty much do the same thing, except for 2 of them. If they find in issue, they will get a hold of you to verify if what they are seeing is you or not. If it’s not you, they will deal with the issue. The 2 exceptions were from Zander™ and Progressive™.


Zander™ assigns a caseworker to your claim and does absolutely ALL the work for you. All the phone calls, paperwork, etc… and they will continue to work your case until your I.D. is restored to its pre-theft status. No matter how long it takes or how expensive it gets.


Progressive™ assigns an Experian™ (yes, the credit bureau) agent to your case to help and assist you. They don’t do it for you.

My Conclusion

All of these programs sound good on the surface. All the monitoring, coverage, guarantees, and restorations sound like you’re getting a lot for your buck. The thing is, most of that stuff you can do on your own for free, by watching all your accounts (banks and credit cards). This is a must anyway, regardless if you have monitoring protection or not. You can also pull a free credit report each year from all 3 bureaus without paying for someone to do it for you. This is just a few things that caught my eye right away. The ONLY thing that really concerns me is “What happens if my I.D. is stolen?” and “What’s the cost?” and with that narrowed down, the true choice for me and my family was Zander™ and we have used Zander™ for a few years now. It just makes more sense to me. Now you may not agree with me on this and that’s fine. You all have to do what is best for your family’s needs and you should really look into this far more in depth than what I posted in this blog. Remember, identity theft is no joke and the problem is only getting worse, not better. You need to look into this and get some sort of protection for you and your family. I look forward to reading your thoughts on this matter so please share them below.